IRDAI's Rules on AI in Insurance Claim Settlement: What's Allowed

IRDAI has not issued a standalone AI regulation for claims. Instead, AI-assisted claim settlement falls under existing rules — chiefly the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 and the linked Master Circular. These permit technology and analytics, but the insurer stays fully accountable for every claim decision.

This is an explainer, not legal advice. For binding requirements, refer to the official IRDAI circulars.

The Insurance Regulatory and Development Authority of India (IRDAI) frames claim settlement around outcomes — speed, transparency and fairness — rather than around specific tools. That means artificial intelligence (AI) is treated the same way as any other technology: permitted as long as the insurer meets its obligations and remains answerable for the result. Here is what that looks like in practice for Indian insurers.

Has IRDAI Made Any Rule Specifically About AI in Claims?

Not a dedicated one. There is no IRDAI regulation titled or scoped exclusively to "AI in claim settlement". The primary legal instrument is the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024, supported by the Master Circular on Protection of Policyholders' Interests, 2024 (Ref: IRDAI/PP&GR/CIR/MISC/117/9/2024). Together they set the timelines, disclosures and accountability that any claim process — manual or AI-assisted — must satisfy.

The clearest official acknowledgement of AI in claims comes from a Press Information Bureau (PIB) release, which notes that for motor losses below ₹50,000 — where the Master Circular says a registered surveyor is not mandatory — "insurers are using App based methodology with AI-Driven assessment for the same" (PIB, 16 December 2025). In other words, IRDAI's framework leaves room for AI within defined limits; it does not carve out a separate AI rulebook.

The governing principle is accountability. The 2024 Regulations require insurers to have board-approved claim-settlement policies, to disclose the roles and duties of surveyors and loss assessors, and to ensure that all deductions and settlements are transparent, reasonable and supported by documentary explanation. An algorithm does not dilute any of these duties — the insurer owns the decision.

What Claim-Settlement Rules Apply to AI-Assisted Claims?

The same rules that apply to human-handled claims. The Master Circular fixes turnaround times that hold regardless of whether AI touched the file.

Delay carries a cost. If a claim is not settled within the specified timelines, the claimant is entitled to interest at bank rate plus 2% from the date of receipt of intimation until the date of payment — and the Master Circular directs insurers to pay this suo-moto, along with the claim amount. AI is often deployed precisely to protect these timelines at scale.

Human sign-off on rejections stays mandatory. Under the Master Circular, a health claim shall not be repudiated without approval of the Product Management Committee (PMC) or a three-member sub-group called the Claims Review Committee (CRC). This is a hard limit on full automation of denials — a model may triage or recommend, but a defined human committee must approve a repudiation.

Where Can AI Legitimately Help Within the Rules?

AI operates comfortably in the assistive layer — the work that speeds settlement without displacing accountable human judgement:

• First Notice of Loss (FNOL) capture — structured intake of claim intimations so timelines start cleanly.
• Document and image assessment — reading discharge summaries, bills and photos; app-based motor assessment for small losses under ₹50,000.
• Fraud and anomaly flags — surfacing suspicious patterns for a human investigator, not auto-rejecting.
• Status communication — proactive, multilingual updates that reduce grievances.

The line IRDAI's framework draws is consistent: automate the assessment and the communication, but keep repudiations, deductions and the final settlement decision transparent, explainable and owned by the insurer.

How AI Helps

AI shortens the distance between claim intimation and settlement without touching the insurer's accountability. Voice AI can automate FNOL intake, confirm documents and push status updates in the policyholder's own language — cutting the delays that trigger the bank-rate-plus-2% interest penalty. It routes complex or suspicious cases to human assessors and the PMC/CRC rather than deciding them.

YuVerse's voice AI for insurance claim communication handles high-volume intimation, reminders and status calls at scale, leaving assessment and repudiation decisions with your teams. The result is faster, better-documented settlements that still map cleanly to the Master Circular's timelines and disclosure duties — technology in service of compliance, not around it.

FAQ

Q1. Does IRDAI allow fully automated claim approvals? IRDAI's rules do not prohibit automation of assessment, but the Master Circular requires that a health claim is not repudiated without PMC or CRC approval, and that settlements be transparent and explainable. In practice this keeps a human accountable for the final decision, especially rejections.

Q2. Is there a specific "IRDAI AI regulation" for insurers? No standalone AI regulation exists for claims. AI-assisted claims are governed by the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 and the Master Circular on Protection of Policyholders' Interests, 2024.

Q3. Can insurers use AI to settle motor claims? Yes, within limits. The Master Circular provides that motor losses below ₹50,000 need not be mandatorily surveyed by a registered surveyor, and IRDAI has publicly noted insurers using app-based, AI-driven assessment for such losses. Refer to the official circular for the exact conditions.

Q4. Who is responsible if an AI model gets a claim wrong? The insurer. The 2024 Regulations require board-approved claim policies and transparent, documented settlements. Accountability does not shift to a vendor or an algorithm.

Q5. What happens if a claim misses the IRDAI timeline? The claimant is entitled to interest at bank rate plus 2% from the date of intimation to the date of payment, paid by the insurer on its own initiative along with the claim amount.

Q6. Does AI change the disclosure duties in claims? No. Insurers must still disclose surveyor and loss-assessor roles and explain deductions and settlements with documentary support — whether or not AI assisted the assessment.

Conclusion

IRDAI regulates outcomes, not tools. For AI in claim settlement, that is liberating and demanding at once: insurers may use AI freely to accelerate intake, assessment and communication, but the timelines, transparency, disclosure and human sign-off on repudiations under the 2024 Regulations and Master Circular remain non-negotiable. Build AI that respects those guardrails, and you get faster settlements and fewer grievances without regulatory exposure.

For related reading, see our guides on the top AI use cases transforming Indian insurance, how AI document processing speeds up medical insurance claims, and how voice AI improves the health insurance claims experience.

Put AI to work on claims without stepping outside IRDAI's rules. Talk to the YuVerse team

References

• IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024 and Master Circular on Protection of Policyholders' Interests, 2024 — https://irdai.gov.in/document-detail?documentId=5625747
• Press Information Bureau — IRDAI Strengthens Regulatory Framework for Motor Insurance Claim Settlement (Release ID 2204758, 16 December 2025) — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2204758
• IRDAI — Consolidated & Gazette Notified Regulations — https://irdai.gov.in/regulations2